Rackspace Technology (NASDAQ:RXT – Get Free Report) and Inspired Entertainment (NASDAQ:INSE – Get Free Report) are both small-cap business services companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, dividends, profitability, valuation, earnings, risk and institutional ownership.
Insider and Institutional Ownership
82.5% of Rackspace Technology shares are held by institutional investors. Comparatively, 77.4% of Inspired Entertainment shares are held by institutional investors. 2.9% of Rackspace Technology shares are held by company insiders. Comparatively, 13.1% of Inspired Entertainment shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
Volatility and Risk
Rackspace Technology has a beta of 2.18, indicating that its stock price is 118% more volatile than the S&P 500. Comparatively, Inspired Entertainment has a beta of 1.26, indicating that its stock price is 26% more volatile than the S&P 500.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Rackspace Technology | 2 | 4 | 0 | 0 | 1.67 |
| Inspired Entertainment | 0 | 3 | 4 | 1 | 2.75 |
Rackspace Technology currently has a consensus target price of $1.51, indicating a potential downside of 33.66%. Inspired Entertainment has a consensus target price of $14.00, indicating a potential upside of 67.66%. Given Inspired Entertainment’s stronger consensus rating and higher possible upside, analysts clearly believe Inspired Entertainment is more favorable than Rackspace Technology.
Valuation and Earnings
This table compares Rackspace Technology and Inspired Entertainment”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Rackspace Technology | $2.74 billion | 0.20 | -$858.20 million | ($1.08) | -2.11 |
| Inspired Entertainment | $297.10 million | 0.76 | $64.80 million | $1.99 | 4.20 |
Inspired Entertainment has lower revenue, but higher earnings than Rackspace Technology. Rackspace Technology is trading at a lower price-to-earnings ratio than Inspired Entertainment, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Rackspace Technology and Inspired Entertainment’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Rackspace Technology | -9.43% | N/A | -1.55% |
| Inspired Entertainment | 18.78% | -1,176.67% | 15.10% |
Summary
Inspired Entertainment beats Rackspace Technology on 11 of the 15 factors compared between the two stocks.
About Rackspace Technology
Rackspace Technology, Inc. operates as a multi cloud technology services company in the Americas, Europe, the Middle East, Africa, and The Asia-Pacific region. It operates through three segments: Multicloud Services, Apps & Cross Platform, and OpenStack Public Cloud. The company provides public and private cloud managed services, which allow customers to determine, manage, and optimize the right infrastructure, platforms, and services; professional services related to designing and building multi cloud solutions and cloud-native applications; and managed hosting and colocation services. It also helps customers establish governance, operational, and architectural frameworks to mitigate risks and reduce inefficiencies to manage costs, achieve industry-specific compliance objectives, and enhance security. In addition, the company offers managed applications, including running large-scale SaaS applications for customers on its and public cloud infrastructure; managed security services in the areas of security threat assessment and prevention, threat detection and response, rapid remediation, governance, and risk and compliance assistance across multiple cloud platforms, as well as privacy and data protection services, including detailed access restrictions and reporting; data services; and professional services related to designing and implementing application, security, and data services. Rackspace Technology, Inc. was founded in 1998 and is headquartered in San Antonio, Texas.
About Inspired Entertainment
Inspired Entertainment, Inc., a gaming technology company, engages in the supply of content, platform, and other products and services to regulated lottery, betting, and gaming operators worldwide. It operates in four segments: Gaming, Virtual Sports, Interactive, and Leisure. The Gaming segment supplies gaming terminals and software to betting offices, casinos, gaming halls, and high street adult gaming centers; a portfolio of games through its digital terminals under the Centurion and Super Hot Fruits names; and traditional casino games, such as roulette, blackjack, and number games. The Virtual Sports segment designs, develops, markets, and distributes ultra-high-definition sports games, including greyhounds, tennis, motor racing, cycling, cricket, speedway, golf, and dart, and other horse racing games under the V-Play Soccer, V-Play Women's Soccer, V-Play Football, V-Play Basketball, V-Play Baseball, and V-Play NFLA names. The Interactive segment provides a range of random number generated casino content from feature-rich bonus games to European-style casino free spins and table games. The Leisure segment supplies gaming terminals and amusement machines in pubs, bingo halls, and adult gaming centers, as well as family entertainment centers, bowling centers, and other entertainment venues. Inspired Entertainment, Inc. is headquartered in New York, New York.
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